Stocks could drop as much as 20%, but they likely will rebound and take the S&P 500 to 2,500 in the next three to five years, says forecaster Peter Morici.next three to five years, says forecaster Peter Morici.

Stocks have scored decent gains this year, with the S&P 500 minting 19 records to date. That has prompted some market participants to call for the S&P
/quotes/zigman/3870025/realtimeSPX to hit 2,000 in 2014.

But it’s just when investors start to feel complacent that they should turn around and consider the chance of a correction, according to Jim Paulsen, chief investment strategist at Wells Capital Management.

It’s becoming a drumbeat of investors wary of the big downturn: Traditional “Sell in May” weakness coupled with the midterm year of a presidential cycle makes the market fertile ground for a correction.

After all, stocks are creeping back up toward record highs during a historically vulnerable time for the market.

The latest comes from Stephen Suttmeier, technical research analyst at Bank of America Merrill Lynch, who points out that there is a more than 23% chance of the broader stock market shedding a fifth of its value sometime before October.

The S&P 500 Index
/quotes/zigman/3870025/realtimeSPX peaked and fell both in 2000 and 2007, so are we in for what S&P Capital IQ’s Sam Stovall calls a “Seven Year Glitch” in 2014?

Several bad market omens have been circulating lately as investors try to come to terms with a more than five-year old bull market that stubbornly is 2% to 4% off its recent highs for 2014. There’s the rarity of bull markets that make it to a sixth birthday, the summer slump in markets preceding midterm elections, scary charts professing similarities to past crashes, and now, a warning that stocks tend not to do well for the year if they’re down on the year by Easter.

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